If a prospective homeowner is looking at properties within an HOA it is worth doing a cost-benefit analysis to see if the relative inconvenience of purchasing a home and living within an HOA-governed area is worth the additional value of the property. On the whole, properties within an HOA are worth more than their counterparts in the same area that are not managed by an HOA. However, a potential homeowner would do well to make a careful review of the benefits of a specific property before purchasing.

Careful Analysis

Property values within an HOA are, on average, about 4% higher than nearby homes that are not governed by an HOA. While this may not seem like a large enough difference to make living within an HOA worthwhile, it can be significant given the values of homes in certain areas. For example, with average residential prices exceeding $1M in places such as Coral Gables, Florida, HOA homeowners may have house values that are $40,000 more than those outside of the HOA area.

HOA homeowners experience some inconveniences that are generally not faced by homeowners outside of an HOA area. These challenges may include:

Restrictions on how and when members may use the common areas, such as a pool or patio

The development of covenants and restrictions that govern how members may use the property

The establishment of rules and regulations governing the use of the property

The sharing of costs associated with the maintenance and upkeep of the property

The potential of disputes with the HOA board of directors or the management company the HOA has hired to enforce its restrictive covenants and other community rules and regulations

Whether these sacrifices are worthwhile depend on the value the homeowner derives from being in an HOA. There are a number of factors that determine whether or not an HOA is a good fit for a property. Some of these factors include:

The Common Area Amenities

Are the fees being paid for the amenities (such as a pool, golf course and clubhouse) equivalent to what would be paid for these services outside of the community? How does the size and location of the common area amenities compare with those that are found outside of the community? Are utilities and other monthly payments (such as Internet access and cable television access) included in the fees? If the answers to these questions are favorable, then paying the additional fees and living with the restrictions imposed by the HOA may be worth it.

In addition, homeowners can ask themselves whether they will use the amenities they are paying for. Homeowners within an HOA will need to pay for the common area amenities whether or not they use them.

“HOA homeowners experience some inconveniences that are generally not faced by homeowners outside of an HOA area.”

The Age of the Community

Whether an HOA has been established for a long time or is relatively new can have an impact on the nature of the fees that homeowners need to pay.

For example, HOA fees typically rise every year in older HOA communities. However, in the case of newer developments that are not yet completely at capacity, fees may actually decrease over time. This is because as more homeowners fill up the development there are more individual units to share the cost of the common areas.

Location, Location

As in any house purchase, the location of the property is an indication of its value. Where a home is located within an HOA can determine how much higher the property value would be over that of a non-HOA home in the surrounding area. The average higher value of 4% takes all HOA properties in the US into consideration, but individual properties can vary widely. In the most general terms, houses located closest to the common area amenities are going to be valued higher than homes on the outer edge of the community. All of the homes within and HOA are generally subject to the same fees and restrictive covenants. This means that it is often in the interest of the purchaser of a property to buy a house closer to the amenities than a house in the outskirts of the community.

South Florida Law

So if you are asking, “Should I buy in an HOA?”, it is important to understand the benefits and restrictions that are associated with membership in that particular HOA. Additionally, it is important to consult with an attorney who is knowledgeable about HOA laws in order to determine whether or not membership in any particular HOA is a good fit for the property you are interested in purchasing. South Florida Law has boutique firm attention to detail with the resources of a large law firm, the ideal combination to assist home buyers in making decisions like whether to buy within an HOA-governed area. If you are considering a home purchase within an HOA, then reach out to us today either by phone at (954) 900-8885 or via our contact form.